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MY PLANE RIDE WITH GARRET By Jeffrey G. Acton |
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While waiting for the return flight to take off to San Jose after our recent franchisee meeting in Las Vegas, I was sitting in my seat, absently watching the other passengers enter the plane and hoping that the seat next to mine would remain empty. I saw a group of about ten good looking men and women enter the plane, all of whom appeared to be in their early twenties. It was obvious that they were returning from an all night Las Vegas extravaganza, the type of which age probably has now precluded me from performing.
My hopes for the empty seat were dashed when one member from
the group sat down next to me. In looking at these people, I was
immediately struck by a seeming incongruity. First, they all had the blood
shot eyes, tired look and rumpled casual clothes, all of which were
reflective of a long night. But, second, as they sat in their seats, they
began to banter back and forth such esoteric ideas as critical theories of
alternative constraint and process efficiencies. Naturally, I had little
idea what they were talking about, but I was somehow intrigued. My interest
almost became sheer bewilderment as the young man next to me began reading
an article entitled “The Implications for Parallel Processing Within the
Context Of an Inefficient Outsourcing of the Internet Infrastructure.” I
casually asked this young man about the night before, but was really more
interested in knowing where his group was going. After some light-hearted
conversation about the highlights of their previous night’s escapades, he
told me that they were all enrolled in the MBA program at
Stanford University.
At that point, I was not sure if I was more jealous of these individuals because they were less than half my age or because they were more than twice as smart. Knowing that these kids are the best and brightest, I thought I would maybe ask a question or two and perhaps be provided an answer which might give some benefit or insight for my business. Further, I figured that I should make the inquiry now because in one year their knowledge would probably not be provided free of charge. I asked the young man if he could provide a profit maximizing axiom which is applicable to any business. Without hesitation, this young man introduced himself as Garret (seems that all Stanford students have a name like that) and politely said, “Manage your variable costs and control the costs about which you have absolute authority.” As Garret went back to reading about the implications for an inefficient outsourcing of the internet infrastructure, I sat in my seat, thought about what he had just told me and tried to apply his insight into our business. I must say that I was not making a great deal of progress with my analysis, but did not want to follow up the question because I did not want this kid to know that I had probably just missed the obvious. About ten minutes later, Garret put down his article, turned to me as if realizing that I was still unsure about what he had said. Void of any smugness, he said, “Now in your Round Table Pizza business, your labor costs are variables which must be managed and your cost of sales are costs which must be controlled. As you have been in this business for a while, you must know who the distributors and manufacturers are and should be in a position to purchase from the one who provides the most favorable cost.” Now I knew the kid was smart, but he now seemed to be displaying extra sensory perception qualities as there had been no previous mention of Round Table Pizza and certainly no mention of the duration of my employment. As Garret seemed willing to discuss these issues further, I decided to focus on the ESP issue later and, instead, turned my attention on the more mundane. Garret explained that the cost of labor cannot be controlled, but can only be managed because the pool of labor and the demands of the labor pool are always shifting. He continued by explaining that on the other hand, the cost of sales can be controlled because the company has the absolute authority to purchase from a given manufacturer and a given distributor. I am sure that Garret soon became bored with me. But, before returning to his article and, without me asking, he answered the bigger question by simply explaining, “I read the luggage tag on your carry-on bag.” I looked down and saw a black bag covered with “Round Table Pizza” and logo and to which was attached an Aztec like picture on a well worn, almost tattered, red luggage tag which read, “RTOA ■ 20th Anniversary: Club RTOA ■ Mexico 1991.” I glanced back over to Garret and I think then I may have seen something approaching a smug look creep over his face. I was hesitant to share any more about my business with Garret because I was now becoming somewhat paranoid in feeling that he knew more about my business from a fleeting glance at a luggage tag than I knew from a quarter century of work. Nonetheless, he had piqued my curiosity in that he did not use the plural when he referenced the use of a manufacturer or distributor. Risking a total emasculation of my professional self esteem, I asked why he spoke of only one distributor or manufacturer. Garret now seemed taken back by what he must have recognized as my total inability to understand the most elementary economic issues. Nonetheless, and perhaps in a polite deference to me being his elder, he explained that the use of one distributor or manufacturer allows each one to distribute or produce more units at a lower cost per unit than would be possible if there were more than one such distributor or manufacturer. He concluded his thought with the observation that, “I am sure that a company such as Round Table Pizza, which has the cost of sales being its greatest controllable expense, is sufficiently sophisticated so as to have maximized and benefited from this economy of scale.” At that point my paranoia subsided because I knew we were not that sophisticated and, hence, was confident that I still knew more about Round Table than Garret did. Except for the turbulence in my mind, the balance of the flight was uneventful. Here was this kid who referenced the obvious and I knew he was right. I began to think of how Garret would react if I told him that our system does not either maximize or benefit from this economy of scale truism. I then began to think of how I could couch the reasons which our system has purported for maintaining our current practices. I soon decided to keep the thoughts to myself for two reasons. First, I was concerned that Garret would probably see a business opportunity which would somehow be exploited at my expense. Second, I did not want to see that look on his face which I am sure would have expressed his intellectual contempt for my business practices. Instead, I offered him my package of peanuts. As the plane touched down, I thought of how we have been very fortunate over the years and, even decades, to have established relationships with so many wonderful people who manufacture and distribute our products to us. In fact, those same relationships are probably the overriding reasons for maintaining our current purchasing practices. Further, I thought of the often recited problems incident to structuring and coordinating a purchasing program which could benefit from the economies of scale. I then thought that if we had one manufacturer for a product and one distributor for all the products, would we not still have other wonderful relationships with people who may have a vested interest in helping us overcome some of the other problems? Further, I asked myself the question of whether or not there is a need to increase aspects of our profit structure? Regarding the obvious answers to these last two questions, I was probably most pleased that it was not Garret who had pointed them out. Walking out the tunnel from the plane to the airport terminal, I again thought about the difficulties in structuring and coordinating an efficient purchasing program. I almost succumbed to the temptation of forgetting the idea. As I entered the airport terminal, looked over my shoulder, and saw Garret again, an unsettled sensation overcame me. In trying to sort out my anxious feelings, I kept thinking about how during one brief plane flight, this kid, who had not slept the night before, had probably mastered the convoluted issues incident to an inefficient outsourcing of the internet infrastructure. More harrowing was my next revelation that Garret, who was able to deftly analyze the profit issues incident to our cost of sales and who quickly figured out my source of employment, may one day work for the competition. When I got home, I invested in a new luggage tag. Jeffrey G. Acton, Esq., is a multiple unit owner of Round Table Pizza franchises, serves as President of the RTOA (Round Table Owners Association) and also serves on the AFA’s Board of Directors. Contact Jeff at 831-336-8808 or jacton1@prodigy.net. |
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AFA Enews - December 12, 2003 - Volume 1 Number 3 |
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